Patrick de la Chevardiere, Total CFO, explains financial implications of the Elgin Platform gas leak problem
Excerpts from the speech follow:
"From an environmental standpoint, it is important to understand that Elgin is a natural gas and condensate field. It is not an oil field. While we understand the comparisons to Macondo are inevitable, we would like to state clearly that the situations are very different. There is no crude oil involved here, and therefore the current impact on and risks for the environment are relatively low.
Let me now give you our current best estimate of the financial implication of the Elgin situation. Following this incident, we have shut down the Elgin field together with the adjacent Franklin field.
To give you a sense of the contribution to our production of these fields, Elgin-Franklin produced about 130 kboe/d of production in 2011, and Total's net share based on our 46.2% interest was about 60 kboe/d. Our budget included estimated Elgin-Franklin production of 53 kboe/d net into Total for 2012. This is about 2% of our total production.
In terms of lost earnings, we estimate that the shut-in production represents a negative impact of about $1.5 million per day at the net operating income. In addition, estimated cost of the response and remediation activities currently underway is around $1 million per day for Total, including the costs of the two drilling rigs mobilized for the relief wells.
We have third-party insurance that should provide adequate coverage both for property damage, including the cost of remediation, and for liability, including environmental damage. We appreciate the level of concern in the market, so let me assure you that we believe we have ample resources to deal with this situation. We have a robust liquidity position with $19 billion of cash and cash equivalents on the balance sheet as of the end of 2011, and we also have undrawn committed credit lines for about $10 billion. In addition, we are confident that this event has not impacted our ability to access the capital markets."